The government on Wednesday raised the duties on imports of both long- and flat-steel products by 2.5 percentage points each to 10% and 7.5%, respectively, primarily to protect the local industry from rising imports from China.

The duty hike will reduce the price differential between the imported and domestic steel but the neighbouring country, troubled by over-capacity while the world demand for the alloy is muted, could respond by cutting prices, analysts said.

Although steel minister Narendra Singh Tomar expressed the hope that the domestic steel units would now get the much-needed relief from cheaper imports, the industry said the quantum of the duty hike was inadequate. Also, it will have little effect on imports from Korea and Japan, given New Delhi’s free trade pacts with both the countries.

Steel imports to India grew by 55% in the first two months of the current fiscal to 1.7 MT, while that from China rose 24%. Imports make roughly 10% of the domestically consumed steel at present.

Rakesh Sinha, senior director, India Ratings & Research, said, “The duty hike will reduce the gap between price of domestic products and landed cost of Chinese steel (currently estimated to be between 12-17% across products) by only 2.5%. Given the price discount on imported steel, the impact (of the duty hike) is likely to be minimal on the imports.”

China, Japan and Korea are the top three exporters of steel to India, cumulatively contributing 74% to the country’s total imports of the alloy. Japan and Korea mostly export flat products while China sends both flat and long products to India.

The country continued to be a net importer of steel in the first two months of the current fiscal, with in-bound shipments growing an annual 54.5% to 1.67 MT.

Source: The Financial Express